JOURNALS OF ROBERT MAAS

Tuesday, February 09, 2010

BLOG 75

Q. WHEN IS “THE SAME” NOT THE SAME: A. WHEN YOU’RE A JUDGE?

I try to read all of the UK court decisions on tax. Sadly, although I manage to do this, I do not always do it as promptly as I would like. Furthermore I rely on a subscription service, Simon’s Tax Cases, that does not report the cases as promptly as I would like.

Accordingly it was only the other day that I read the August 2009 decision in Matalan Retail Ltd v HMRC. This is a Customs duty case. I do not profess to know very much about Customs duty. Nevertheless I persevere with such cases because they sometimes make points that are of interest in relation to other taxes.

With the Matalan case I was intrigued by a criticism that the judge made of the Tribunal. He thought the Tribunal “in error” because it looked at goods which “are indistinguishable from” the item for which HMRC had given a tariff ruling. This was a departure from the wording of the legislation. This requires the goods declared to correspond “in every respect” with the goods for which the ruling has been granted.

I am often intrigued at the depth of analysis by lawyers. I am however nonplussed as to how the judge believes that A can be “indistinguishable from” B and yet not correspond to B “in every respect”. I find the two expressions themselves identical in meaning. Thank goodness I opted to become an accountant rather than a solicitor, as I clearly cannot cope with the fine nuance that the judge found between the two.

This was that Matalan allocated a different stock number to a blue swimsuit from that which it gave a green swimsuit of the same pattern and construction. Accordingly as Matalan had applied for a tariff ruling for a blue swimsuit it could not reasonably expect that the same ruling would have applied had it been green. In my youth (many years ago) a common expression to indicate disbelief was “the mind boggles”. My mind certainly boggles at the concept that a trader who seeks a tariff ruling, i.e. a decision by HMRC as to what rate of customs duty a particular category of goods attracts, should have to send to HMRC a large bundle including a sample of every colour and, I assume, size in which a garment is manufactured if he wants a ruling that he can rely on.

Indeed my accountant’s mind not only boggles but cannot cope at all with the concept of stock numbers making item A that is indistinguishable from item B nevertheless not identical to it! I do not have a clue how Matalan devises its stock numbers. However I suspect that a blue swimsuit held in a store in Manchester may well have a different stock number to the identical swimsuit held in a London store.

So how does Marks and Spencer cope? If I cannot find my size in a store, they can tell me fairly quickly, which stores hold the garment that I desire. Accordingly I imagine that their computer system must use a code that can identify this. Their website tells me that they have over 600 stores in the UK and over 295 outside the UK. The Customs Code is an EU code. A tariff ruling given by HMRC is binding throughout the EU. I like to be accurate but cannot be bothered to spend the time to find out how many of the non-UK stores are in the EU, especially as I find that they have 12 in Cyprus but none in France (or Germany, or Australia, or the USA, so their overseas operations do not follow those of most businesses). Let’s assume they have 700 stores in the EU. Are they expected to send HMRC 700 copies of every colour and size of each item for which they want a tariff ruling? For example I see that Blue Harbour Drawstring Swimming Shorts come in 4 colours and 5 sizes. Does that mean if Marks & Spencer want a tariff ruling on them they have to send HMRC 14,000 garments, i.e. 1 of each size and of each colour sold in each store?

A far easier question to answer may be, “Does the law reflect common sense”? On the basis of the above, I would answer that with a resounding, “No!”